It takes two to tango and two to tax, and the Senate isn't dancing with the House on revenue for school finance. Their bottom line numbers are similar. Both houses started with the idea of lowering local school property taxes by 50 cents, and that sets the size of the project. But their methods of getting to the bottom line are as different as Mars and Venus.

The Senate's temperature on payroll taxes, a key component of the House plan? "Ice cold," to quote Sen. Florence Shapiro, R-Plano, chairman of the Education Committee. Senate Finance Chairman Steve Ogden, R-Bryan, was in the middle of a more measured answer, telling reporters the Senate was "cool" to the idea, when she interrupted to turn down the thermostat. Ogden, Dewhurst, and the other half-dozen senators at that press conference nodded in agreement when she did.

Sales taxes? Ogden says the Senate isn't willing to raise that consumer/business tax by a full penny, as the House did, but is looking at a half-cent increase. And where the House wants to extend the tax to some goods and services not currently taxed — bottled water, billboard advertising, and car repairs — the Senate is inclined to leave the base alone.

Snack taxes? They won't be in the Senate plan.

Businesses are split on the House plan, as are Republicans inside and outside the Pink Building. The House started with a payroll tax that would replace the current franchise tax. To get enough votes to keep the thing alive, they substituted a "pick your poison" plan that allows companies to calculate the tax both ways — payroll and franchise — and to pay the lower of the two.

Fewer than 20 percent of the state's corporations are required to pay the current franchise tax, and the state is trying to build a business tax that snags the rest of them. But companies have a responsibility to pay no more than they owe, and they're already poring over the legislation to find ways around the proposed levy.

They left at least one hole in their hurry to move a bill. Stuart Greenfield, a former analyst with the comptroller's office who now teaches at the University of Texas but who hasn't gotten out of the habit of kibitzing on state policy, found a loophole that allows existing employee leasing companies to pick their poison (new ones would apparently have to pay taxes based on payroll). That's trouble, if it allows a corporation with a lot of employees to "move" them to a leasing company but to continue their current jobs. The operating corporation could pay a payroll tax based on its newly shrunken payroll. The employee leasing company grandfathered in the tax bill could pay a franchise tax, and the state would miss its shot to collect more money from that business.

The Senate is sticking with the plan outlined — without details — by senators and Lt. Gov. David Dewhurst earlier this year. You can see the original document at:

www.texasweekly.com/ Documents/TexasChildrenFirst.pdf

And the Senate set up a website for feedback on the plan at:

www.texaschildrenfirst.com.

One big component is a business activity tax, or BAT, that would add a company's pre-tax net income to its compensation (after deducting the first $30,000 in salary for each employee) and tax that at a rate of 1.95 percent. That state tax would be paid before federal income taxes, effectively reducing the state tax rate by the corporation's marginal federal rate. Sole proprietors wouldn't pay — that'd be an income tax — nor would small outfits whose income and pay add up to less than $150,000.

The House opted for a business tax that has drawn criticism from some who say it amounts to an unconstitutional personal income tax for companies that operate as partnerships. That's a point of disagreement, but conservatives are arguing amongst themselves about the problem. The House approved it on party lines (one Democrat joined them, and several Republicans voted against it) and won support from the Texas Association of Business. But the National Federal of Independent Business and the Texas Public Policy Foundation, a think-tank based in Austin, oppose that particular tax. And the Young Conservatives of Texas started a firefight with an editorial

Another key component of the Senate plan is a statewide property tax, which would require both a constitutional amendment and some kind of salve for school trustees and superintendents who think it would cost them local control over taxes. The Senate would set that property tax at no more than $1, and would let school districts add their own local taxes of up to 15 cents (phased in a nickel at a time). The House version leaves the local school property tax in place, but would cap it at $1 and allow districts to add a dime in local taxes for local programs (phased in two cents at a time).

Shapiro contends that there is no functional difference on the local level, and says the Senate's version — since it would require a constitutional amendment — would be closed to a court challenge. It would also require voter approval; House leaders have said their plan is constitutional and would take effect faster than one that requires an election. House Speaker Tom Craddick likes the idea of a state property tax — he said earlier this year it's the only surefire way to end the Robin Hood system that has some voters riled up — but says he's not sure the House would support it. Constitutional amendments require two-thirds approval, and some rural members in particular don't like the idea of a statewide property tax.

Both the House and the Senate have talked about higher sales taxes, but the Senate is more sensitive to regressive tax increases. The House would increase the sales tax to 7.25 percent; the Senate has talked about a half-cent increase, to 6.75 percent. Both would add a buck (the House went a silly millimeter longer, to $1.01) to cigarette taxes. The Senate would raise taxes on alcoholic beverages, but not snacks; the House goes for the peanuts on the bar but not the drink. Bottled water and billboard advertising and car repairs would be taxed by the House. The Senate's initial plans — we've seen nothing newer — included a 1.5 percent tax on real estate transactions, like home, land and commercial building sales.

Will it Sell?

Leaders in both chambers insist their tax increases would be exactly offset by local school property tax cuts and, for that reason, say they are shifting taxes and not raising them. Overall, that's right, but it's like a college statistics joke about averages: If you have one foot in hot water and the other foot on ice, then on average, you're comfortable.

SCENE: A town hall meeting somewhere in Texas in January 2006.

DRAMATIC PERSONAE: A, an incumbent Texas officeholder, and B, the challenger in the March elections.

A: I cut your school property taxes and made business taxes in the state fairer.

B: Would everybody in the audience who's paying higher taxes please raise your hand?

The political questions behind efforts to replace local taxes with state taxes: Will voters hot about tax increases be cooled by tax cuts? Will businesses and consumers who end up paying higher overall taxes care that, on a statewide basis, the tax bill was a wash?

E.T.A.

The most interesting school finance news out of the Senate might be the timetable they laid out. A newspaper editor of our acquaintance used to stand behind reporters at deadline and whisper, "Tick, tock, tick, tock." The legislative equivalent is only one notch more subtle. The Senate's timing will put the final talks over school finance and taxes and all in the month of May, the last month of the legislative session. It's not a "take it or leave it" schedule, but it doesn't leave time for a lot of creative writing on deadline.

Earlier plans to combine the Education and Finance committees for school finance hearings have been put aside. Shapiro said her committee will begin its slog through HB 2 — the education bill — after the Easter break. After hearings and such, she hopes to have that bill before the full Senate in late April. Ogden hopes his Finance Committee will send a state budget to the full Senate early next week for consideration right after Easter. Finance will start working on HB 3 — the tax bill — while the House is digesting the budget, and hopes to have its version ready for a full Senate vote in early May. Conference committees to reconcile differences between what the House has already approved and what the Senate wants will meet then, followed by final votes in both chambers.

May is the last month of the session, and with rules that progressively limit legislative action at the end of a session, that means the tax bill will be one of the last things under consideration as the deadline approaches. Tick, tock, tick, tock.

Got a Chair?

One provision of the House tax bill would give the Texas Supreme Court original jurisdiction in school finance cases, meaning lower courts wouldn't be hearing and ruling on those issues before the state's highest civil court gets involved. That'd be unique — no other cases go directly to the court for arguments and facts, and there's not even a witness chair in the courtroom where the Supremes do business. Right now, the cases are generally heard by district judges in Austin and then appealed to the Supremes, directly or eventually.

For the Record

The House's vote on HB 3 — the tax bill — was 78-70. That tally was on party lines, with a few exceptions. One Democrat, Al Edwards of Houston, voted for the bill. Nine Republicans — Pat Haggerty of El Paso, Glenn Hegar of Katy, Delwin Jones of Lubbock, Terry Keel of Austin, Jodie Laubenberg of Parker, Brian McCall of Plano, Tommy Merritt of Longview, Ken Paxton of McKinney, and Elvira Reyna of Mesquite — voted against it. Two members — Craig Eiland, D-Galveston, and Bryan Hughes, R-Mineola — were absent.

Arithmetic, From Our Department of Corrections

We mentioned a study on appraisal caps last week without mentioning two of the sponsors. In addition to the Texas Association of Counties, the Texas Municipal League and the Texas Conference of Urban Counties paid Perryman & Associates for the work. That report describes the hazards of limiting — for tax purposes — growth in property values.

Legislators have proposed lowering the growth limit on residential properties from the current 10 percent, and possibly adding caps on tax valuations of commercial properties. A version on its way to the full House would cap appraisal growth on all properties at five percent. A Senate version, backed by Lt. Gov. David Dewhurst, would further split the tax rolls, lowering the cap on homesteads to five percent while leaving commercial property uncapped. And local governments, who've loudly complained about the state-imposed caps, would be allowed to opt out and let property values do what they do. Gov. Rick Perry supported a similar "split-roll" cap two years ago, and business groups howled.

While we're at it, we need to clean up our math. According to the comptroller's office, which does an annual report on property values and taxation, school property taxes made up 59.8 percent of the average property tax bill in 2003, a percentage that hasn't changed significantly since the early 1990s. Cities, on average, got 15.3 percent. County governments got 14.3 percent, and special districts, on average, got 10.7 percent of the property tax dollar.

Overall property taxes rose 95.8 percent in the ten years starting in 1993, rising to $28.9 billion from $14.7 billion. School taxes rose 98.9 percent; city property taxes rose 86.9 percent, counties rose 89.3 percent, and special district property taxes rose 101.4 percent.

And finally, this: If the Legislature were to lower school property taxes by 33 percent, and if other property taxes didn't change, the average property owner would get a 19.7 percent cut in property taxes. We underestimated that amount last week, along with the portion of the property tax bill made up by school taxes, and for that we are sorry, sorry, sorry.

Bubble, Bubble

We're getting to the halfway point of the session — there will be ten weeks in front of us next Tuesday and ten behind — and other big pots are starting to boil.

• The Senate Finance Committee expects to vote out a budget on Monday. That'll be ready for a floor vote right after the Easter break.

• The Legislature's efforts to hold the line on spending two years ago are spitting back; the supplemental appropriations bill that will fill the gap between what was budgeted and what was spent (more was spent) has climbed to over $2 billion, and House Appropriations Chairman Jim Pitts, R-Waxahachie, says budgeteers will have to raid the state's Rainy Day Fund to cover that tab. His bill currently calls for $1.4 billion for services in the state Medicaid program; $195.8 million for costs related to the Children's Health Insurance Program, or CHIP; $85.8 million for health and human services; $63.8 million for the department of aging and disability services; $27.4 million for temporary capacity for the crowded state prison system; $31.8 million for managed health care in the prisons; $30.7 million for the Teacher Retirement System's payroll pass-through for teachers; $37 million for textbooks; and $97 million to cover state property sales that were expected but that didn't go through.

• The Senate has sent a workers compensation reform bill to the House. That could still turn into a fight, though it's been relatively quiet so far. The House wants to kill the agency that regulates comp insurance and fold that into the Texas Department of Insurance. The Senate leaves it separate, but moves the management chairs around. Business wants costs cut and medical providers reigned in, and labor is arguing for either a place on the board or an agency that represents people hurt on the job.

• The Senate's package of reforms for the agencies that are supposed to protect children and the elderly has gone to the House and with taxes and school finance out of the lower chamber's hair for now, that'll get some attention.

Bottom's Up

It's been a while since the comptroller's office updated its periodic comparisons of facts about Texas and other states, and Sen. Eliot Shapleigh, D-El Paso, has grabbed the idea. His "Texas on the Brink" is a downer of the first order if you're at all competitive about these things. The last update of the comptroller's "Texas: Where We Stand" is at:

www.window.state.tx.us/comptrol/ wwstand/wwstand.html.

Her office also looks at stats for counties along the state's border with Mexico. That was last updated in 2003, but a spokesman says it's being refreshed as we write:

www.window.state.tx.us/specialrpt/snapshot/< /P>

Shapleigh's various rankings are current and available on his website at:

www.shapleigh.org/files/ focus_documents3.pdf

The numbers illustrate his introduction, which calls the listings "the expected outcome of an inadequate, outdated and terribly regressive tax system..." and says the state will remain near the bottom of the state rankings as long as it "ranks near the bottom in the amount of state revenue raised and services offered." Shapleigh's staff included footnotes to back up their listings, and they concentrated their research on the state's tax system and its spending in certain areas including education, health care, children, welfare, access to capital, public safety and so on.

Whether you like each ranking can depend on your politics. For instance, Shapleigh's got the state ranked 49th in tax revenue raised per capita, and 49th in general spending per capita. Sometimes, the numbers stink regardless of philosophy: Texas is 50th in high school graduation rates, 48th in college-prep SAT scores, 1st in the percentage of uninsured children, 2nd in teenage birth rates, 45th in home ownership rates, 2nd in highway fatalities and first in flood-related deaths.

A More Appealing Job

Philip Johnson's appointment to the Texas Supreme Court — assuming he wins Senate confirmation — brings that nine-member panel to full strength. Like everyone else on that court, he is a Republican. He is replacing Michael Schneider, who came to the court in September 2002 and left for a federal judgeship last year. Johnson comes on board in time to hear the school finance case against the state; the briefing back-and-forth in that case is set to end on the day after the legislative session ends, and the court will hear the school finance arguments and make a decision some time after that.

Only two of the justices — Nathan Hecht, who came to the court in 1989, and Priscilla Owen, who joined in 1995 — were on the court the last time it opined on school finance. Harriet O'Neill joined in 1999, and the remaining six justices joined the court in 2001 or later. Put it this way to get your bearings: Gov. Rick Perry had already replaced Gov. George W. Bush when two-thirds of the current Texas Supreme Court took office. Including Johnson, five members of the court started there as Perry appointees.

Johnson, an Air Force vet, went to Texas Tech and worked for a Lubbock law firm before getting a spot on the Amarillo appeals court in 1999. He was named chief justice there in 2003.

• File this under "Membership has its privileges". Supporters of Gov. Perry get word on his major government appointments 24 hours before the rest of Texans. According to the emails sent by Theresa Spears at the campaign to the "Chairs and Steering Committee," they find out before some of the applicants. That group got word of Johnson's appointment to the Texas Supreme Court on Monday — it was announced publicly on Tuesday — and Spear's note to the campaign insiders asked them to keep the information secret from the hoi polloi for 24 hours. "In many cases, we are still in the process of notifying all of the applicants under consideration for the appointment," said the email in a caveat that apparently is included with all such early announcements. A spokesman for the campaign said the announcement was routine, and that the emails advance every such appointment.

Political People and Their Moves

Karen Hughes, the public relations wiz for the Texas GOP and then for George W. Bush, is returning to government work as an undersecretary of state assigned to improving the image of the U.S. in the Arab world. She'll report to Secretary of State Condoleeza Rice. Hughes left the Bush Administration almost three years ago to spend more time with her family and to write.

Austin school trustee John Fitzpatrick, who's been busy with workforce and job training efforts for several years, will head the Texas High School Project, the public-private effort to "redesign" 50 high schools in urban and border communities in Texas. That project is using $60 million in state funds and $60 million from several private foundations. Paula Peters, who filled in as executive director, will be the THSP's COO.

John Edwards — the one who's never been a U.S. senator — is the new executive director of the State Bar of Texas. He'll be returning to Austin; Edwards used to lobby for the Texas-New Mexico Power Co., but moved to Maine a few years ago.

Wayne James, the executive director of the Texas Lathing and Plastering Contractors Association, is retiring after 20 years in that job and 48 years working for trade associations. Rest, man, rest.

Christopher Hosek is following his boss — Elizabeth Ames Jones — a couple of blocks north. He worked for her in the House, and will be her chief of staff at the Texas Railroad Commission.

Deaths: Leroy Wieting, D-Portland, who served in the Texas House for 22 years ending in 1984 and then became a lobbyist. Wieting, who served on the Appropriations and Ways & Means committees, among others, was 78.

An Entire Feud, in Quotes

Matthew Griffing with the Young Conservatives of Texas in an op-ed article blasting House Speaker Tom Craddick for pushing through what that group calls "a virtual income tax" in HB 3: "Hopefully, the 2006 election will be a wake-up call to those Republicans who bowed to Craddick's pressure. Too many of them have forgotten that they answer to their constituents, not Craddick. In fact, as speaker, he answers to them, and it is time for him to be reined in. If that fails, then it will be time for a new speaker. Still interested in the job, Pete Laney?"

Rep. Dan Flynn, R-Van, in a reply letter signed by 36 other House Republicans: "The 'payroll tax'... is not an income tax. It is not a deduction taken from an employee's paycheck, as are the federal income tax or social security tax, and thus is not an income tax at all." ...

"Had the Democrats been in power, they would have passed a massive tax increase bill last session and would pass another one this session under the guise of being for school finance. Instead, Speaker Craddick has directed that any new education funding come from within the existing revenue levels for the state."

From Rep. Jim Dunnam, D-Waco, and other House leaders, who saw Flynn's reply: "Like most Texans, House Democrats opposed the $11 billion Republican tax bill that raises taxes on 88 percent of Texans while putting no new money into public education."

Finally, Griffing, the guy who started it all, replying to Flynn: "In regard to fiscal restraint, YCT applauds the tough budget decisions the Legislature made in 2003. It is a shame to see the positive effects of those decisions offset by poor decisions today. Cow-towing to wafer-thin political pressure, the Legislature is dumping more money into public education, which is becoming a bigger and bigger drain on the state budget."

Quotes of the Week

Rep. Jim Keffer, R-Eastland and author of the tax bill: "We wanted to make the greatest contribution to the people of Texas, and that is by cutting their property taxes by one-third."

Rep. Fred Hill, R-Richardson, telling the Austin American-Statesman that his constituents would have a hard time button-holing him before a vote on taxes: "I'm not going to be seen this weekend."

Michael Quinn Sullivan, spokesman for the Texas Public Policy Foundation, quoted in the Fort Worth Star-Telegram: "The Republican-led Texas House of Representatives accomplished something Democrats have wanted to do for decades, but could not. The state of Texas now has an income tax."

Tax-hater Grover Norquist, talking to the Fort Worth Star-Telegram about the tax bill: "As I understand it, this bill is revenue neutral and does not violate the pledge [taken by legislators in Texas and elsewhere]. But we've got to keep an eye on it."

Sen. Florence Shapiro, R-Plano, rating chances in the Senate for various provisions in the House's school finance bill: "And no snack tax, thank you very much."

Rep. Joe Pickett, D-El Paso, quoted in the El Paso Times on the tax bill, which would apply sales taxes to car repairs and raise taxes on tobacco products: "You will either have to quit smoking or quit driving. You won't be able to afford both."

Rep. Norma Chavez, D-El Paso, in that same paper, on one amendment to the tax bill: "Taxing boob jobs and face lifts over diapers for babies was an easy vote."

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Texas Weekly: Volume 21, Issue 38, 21 March 2005. Ross Ramsey, Editor. George Phenix, Publisher. Copyright 2005 by Printing Production Systems, Inc. All Rights Reserved. Reproduction in whole or in part without written permission from the publisher is prohibited. One-year online subscription: $250. For information about your subscription, call (800) 611-4980 or email biz@ texasweekly.com. For news, email ramsey@ texasweekly.com, or call (512) 288-6598.

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This tax thing could have blown up quietly. Comptroller Carole Keeton Strayhorn's decision to widely distribute the fiscal note undermining the bill -- instead of working out problems behind the scenes with House leaders -- turned a nasty glitch in a tax bill into a public firestorm that angered lawmakers without directly boosting the comptroller's prospects.Think how it would have been handled if allies had discovered they'd made a mistake. But House Speaker Tom Craddick chewed out the comptroller's top revenue estimator on the Friday before the bill came up and then, according to the comptroller and her aides, didn't ask for help over the weekend. Ill will was in the wind before the number-crunchers sat down to see what the bill would actually do. Whatever her motivation, Strayhorn's ambush on the House also contributed to a growing problem: A lot of people in the Pink Building don't trust her work. Historically, the agency's reputation was, "Those people sure know their numbers, but they might be might be messing in your business." Now it's flipped: "Those people are messing with you, but they might be right about the numbers." That's a significant change, moving the state's finance officer to a position of suspicion from one of trust. Before her staff had finished calculating the tax bill, lawmakers were passing along rumors that she was going to short-sheet the tax bill and that she would say the related school finance bill was out of balance in the other direction. The numbers were off, and the rumor was only half-correct, but it tells you that lawmakers were expecting her to shoot at them. Relations began cracking two years ago, and reached a peak when, at the end of the last legislative session, Strayhorn momentarily refused to sign off on a state budget she said was out of balance. She backed off, but lawmakers were incensed enough to strip her office of its high-visibility performance reviews and to begin laying the legal groundwork to diminish her influence on budget numbers. Now she's got the House worked up, and some political types came out of the turmoil saying she'd assured financing for any Republican who wants to challenge her in next year's elections. Agriculture Commissioner Susan Combs wants to run but has stopped well short of challenging the incumbent, saying she thinks the seat will be open. Strayhorn has all but said she'll be running for governor and not for reelection.

For a while there, cool Internet names were bringing in piles of money. George Strong is about to find out if that's still the case.The semi-retired Houston political consultant, now luxuriating somewhere around Crystal Beach, is ready to sell off the web domain name political.com if the market it hot enough. He says he's "considering offers" for it, and he's hired a firm to broker the deal if there's a deal to be brokered. He wants to see if there's anything to stories of good web names bringing big bucks. If the prices aren't any good, he says, he'll just keep the website -- where he still posts political gossip every week or so -- and hope it appreciates. Find the details at: www.adastro.com/political.html

The House passed its version of telecommunications reform legislation -- there's more fighting left in that one on the Senate side and, later, in conference committee -- but killed a tax while they were at it.The Telecommunications Infrastructure Fund was set up during a reform effort years ago. It added a fee to phone bills to pay for improved telecom and Internet lines and equipment for schools, libraries, hospitals and such. And it was supposed to end when that purpose was served. But it's hard to kill taxes once they're in place, and lawmakers working on school finance had their eye on the so-called TIF money. But the House, led by Rep. Senfronia Thompson, D-Houston, voted overwhelmingly to kill the tax. After she took to the microphone to "keep the promise" of killing the tax when it wasn't needed, the House voted 99-36 to support her. Unless they vote to put it back in -- an idea that would require a bunch of people to change their votes on a tax bill -- that one's cooked. The TIF brings in about $200 million annually, according to the comptroller's office. It's one of the components of HB 3, the tax bill that's supposed to finance a cut in local school property taxes. • The House was all set to vote on a constitutional amendment capping growth in property values, but mistakes -- and doubts among members about their votes -- pushed the issue back a week. The legislation would cap annual growth in the taxable value of a residential or business property at 5 percent. Current law caps that kind of growth at ten percent. Cities, counties and other local entities that depend on property taxes have been loud in their opposition to new caps. The legislation by Rep. Dwayne Bohac, R-Houston, sets up a constitutional amendment, which needs a two-thirds majority from both the House and the Senate. He'll find out next week whether he's got the support. Meanwhile, an alternative idea -- capping growth in revenues collected from property taxes -- is gathering steam. It wouldn't require a constitutional amendment.

Talk to budget wonks about the Senate's proposed spending plan and you get this: "Well, it's big." And it is big, recommending a bottom line increase of nearly $13 billion, to $139.3 billion from $126.6 billion two years ago.Before you spit up your breakfast cereal, add some caveats: The numbers in the old budget are understated; $3.9 billion of the increase is in federal and not in state funds; and the Senate tried to restore many of the items cut from the budget two years ago when budgeteers started the game $10 billion in the red. And remember: At this stage, it's only a bargaining document. The senators and staffers who did all the work weren't wasting time, but the real budget will come out of the May mash-up between the House and Senate budgets in particular, and the school finance and tax bills, too, should those measures make it to the finish line during the regular session. The state's supplemental appropriations bill hasn't been finalized or much detailed yet, but it could top $2 billion. That mini-budget covers the difference between current spending and the budget passed two years ago, covering increases in spending that weren't in that original blueprint. Like the objects in your car's rearview mirror, the budget behind us -- the old budget -- is larger than it appears after you add in the supplemental numbers. If you watch the state budget, you know what's driving this thing: Education would get a $2.7 billion increase in general revenue (state money) in the Senate plan and another $2.7 billion increase would go into various health and human services programs, primarily health. The $6.5 billion overall increase in GR is dominated by those two areas. Some points of interest in the Senate plan: It would increase state employee pay by 4.5 percent annually, including extra money to get state peace officers at or above what they'd make working for urban police departments; a mess of health and human services programs would be fully or partially restored and waiting lists would be reduced by five percent over two years; textbook programs that were slashed two years ago would be ramped back up; four student aid programs would be combined, including B-On-Time, college work study and both Texas Grants programs. The bill passed unanimously, but some senators complained that the growth in the budget, while it restores some programs to 2003 levels, doesn't cover inflation or the growth in the state's population. It includes a $746 million with list that would cut waiting lists for HHS programs, move eligibility renewals from the current six months to every 12 months for CHIP recipients, add $80 million to college financial aid, put $100 million more into tuition revenue bonds, add $175 million to the higher education fund, among other things.

The redistricting session and the walkouts to Oklahoma and New Mexico inspired Rep. Dan Branch, R-Dallas, to file legislation that would make such out-of-state experiences pointless.He's got two proposals. One is similar to legislation he proposed two years ago and would allow the Legislature to meet so long as two-third of the members currently in the state were present. The key phrase there is in the state. If 51 members left and only 99 were still in Texas, the House could meet and do business with as few as 66 members in the building. It currently takes 11 absences to bust the Senate; under this plan, the upper chamber could lose 11 senators to the charms of Albuquerque and meet with just 14 on hand. Branch's alternative proposal would allow the Lege to meet so long as a simple majority was present. That's 76 in the House and 16 in the Senate. Both would require constitutional amendments, and thus, a public vote. That only requires a majority of the voters who show up.

A week after the Texas House passed the largest tax bill it has ever considered -- a measure intended to replace some local school property taxes with new state taxes -- Comptroller Carole Keeton Strayhorn stunned lawmakers by saying the bill spends three dollars for every two it raises.Her analysis of House Bill 3 is that it would lose more than $2 billion per year after it's up and running. And getting to that point is bumpy: The legislation would raise $2.8 billion in new taxes the first year -- before property tax relief kicked in. In fiscal year 2007, property tax relief would outrun the new tax revenue by $1.8 billion. That gap would grow annually, reaching $2.3 billion by 2009. The biggest problem, she said, is that the House gave businesses the choice of paying the lesser of two taxes without setting a minimum amount each business must pay. Lots of companies would pay little or nothing. And the bill leaves open the hole we wrote about last week, allowing companies with large payrolls to "move" their workers to employee leasing companies and avoiding payroll taxes. House Speaker Tom Craddick and Ways & Means Chairman Jim Keffer said the comptroller's chief revenue estimator signed off on changes to business taxes that went on to win House approval. But the comptroller's new analysis of those changes -- giving businesses a choice between paying something like the current franchise tax or a payroll-based tax -- concludes they won't raise the money needed to pay for a one-third cut in local school property taxes. Strayhorn sent staffers to tell Craddick and Keffer about the numbers and also sent copies of her cover letter and fiscal note to legislators. A copy of Strayhorn's letter and the fiscal note can be downloaded here: www.texasweekly.com/documents/CKSonHB3.pdf Word moved fast and some lawmakers found out about the trouble from reporters. They really, really hate that. Craddick, who held a press conference with lawmakers who fashioned the tax bill, didn't mince words. And he didn't leave open any possibility that the House had botched its tax bill: "Maybe she [Strayhorn] is playing politics or maybe she and her staff are inept. Either way, I assure you that we stand by this bill. The Comptroller's office certified it and we are going forward with HB 3 as is." The comptroller wasn't shy, either, when she talked with reporters shortly after the House leaders tried to shame her: "I just watched the House news conference and my heart goes out to them. They just passed the largest tax bill in history and it does not balance. They thought they were raising $12 billion in revenue. I ran the numbers, and it raises about $8 billion in revenue." Most of the argument is a he said, she said affair. They can't possibly all be telling the truth and it's impossible to figure out just who's lying. Strayhorn said House leaders didn't check with her staff over the last weekend before taking the bill to the floor of the House and said her aides never signed off on the 20 or so amendments eventually added to the bill. She said Craddick told her staff that he didn't need help or a fiscal note on the bill until the House had passed it. Keffer said the opposite: "The comptroller's office spent the entire weekend with the speaker's staff, members of the committee on Ways & Means and LBB working on and improving amendments to House Bill 3, specifically Article 2, which is the business tax section of the bill." He said "no less than a dozen" people were on hand when the revenue wizards signed off on the provisions that went into the final bill. "They assured us it was balanced. Here we are a week later and suddenly the bill is not balanced. How can that be?" Keffer said. Told that House leaders had said her staff "certified" -- with witnesses -- the provisions that eventually wrecked the bill, she came close to calling them liars: "That is absolute hogwash." She said she's not trying to snipe and insisted that she's not playing politics with the numbers: "I'm not going to tell any lawmaker what they can and cannot do. I will tell you that this bill does not do what they said it will do. I am keeping the legislators and the people of Texas informed at every step of the way. That is my job." She said she sent her staff to brief Craddick and Keffer and then delivered her letter and her fiscal note to the rest of the House. Strayhorn said her staff ran the numbers for the 100 biggest corporate franchise taxpayers -- she didn't release names -- and said two-thirds of them would see a cut in state taxes (not counting local school tax reductions) if the House bill took effect. Neither of them talked about getting the tax bill back on track, either by patching the holes the comptroller pointed out or by arguing over the mechanics of the bill. And the political scuffle doesn't mean much to the process itself. HB 3 is on its way to the state Senate, and it doesn't truly matter at this point whether it balances or not. The last time the House sent a big tax bill to the state Senate, in 1991, what started as a $3.3 billion measure was drained during an all-night debate, and the shell that crawled across the rotunda was worth less than $35 million. The Senate pumped it back up to full size and the tax bill came back to life. The Senate is planning a similar remodeling project this time around. Lt. Gov. David Dewhurst and Senate leaders said last week that key provisions of the House plan won't fly in the upper chamber, including the business tax and a full one-cent increase in the state's sales tax. They plan to spend the next month hearing ideas and drafting a tax bill of their own to send back to the West end of the building. For those purposes, it doesn't matter whether the House bill balances or not. And oddly enough, Strayhorn's harpoon didn't take away all of the House's negotiating power on the tax bill. What attracted business to the House bill was the "choose your poison" option that would have allowed each business taxpayer to choose which of two taxes they'd rather pay -- one based on payroll or something similar to the current franchise tax, which includes an income component in its calculations and weighs heavily on capital-intensive corporations. That was also the bill's undoing: The comptroller's number-crunchers assume, for estimating purposes, that every business will take the cheaper of the two options. The House bill didn't include a minimum tax amount, and that opens the door to the sort of loopholes that have made the current franchise tax easy for most Texas businesses to avoid. Business like the choice idea, and the House can go to the inevitable conference committee defending the structure of its bill, if not the exact rates or particular provisions. If they can make that work, it may yet turn out to be more palatable than whatever the Senate proposes. Although it wouldn't raise enough to replace a third of local school property taxes, the House bill, according to Strayhorn, would actually stay in the black during the next budget cycle. That's because the state taxes would be starting up before the school taxes would be dropping. The comptroller said the first year would see income of $2.8 billion with no school taxes to replace. In the second year, school taxes would cost $1.8 billion more than the new tax bill would produce, but that first-year buffer would keep the state's cash flow positive. After that year, the numbers would start running red, in amounts starting around $2 billion annually and growing each year after that. In the five-year fiscal note, the bill ends up $4 billion in the red. In the context of that initial two-year budget, however, the thing would actually have a positive impact on state spending of about $1 billion.

Rep. Ruben Hope has to sit on the runway for a little while longer. The Conroe Republican is in line for a district judgeship that would open up because of a widely rumored but as yet announced resignation. Judge Olen Underwood has let the governor and others know he'll give up his spot on the bench but will stay on as presiding judge of the state's 2nd judicial administrative district. Hope would get the robes and the 284th court, and his seat would open up for a special election. That started its own round of speculation about who might and might not run. Hope, in an effort to cork the talk, sent a letter to Gov. Rick Perry and House Speaker Tom Craddick, copied to everyone in the House, saying he's not ready to leave. "It is my intention to complete this session," he wrote. He didn't say whether he'd stick around for a special session, but then nobody has officially said there will be such a thing. Among other things, that means Hope will remain the chairman of the House Republican Caucus for the rest of the regular session, and with big bills passing with one- and two-vote majorities in place, it means Craddick and other Republican leaders will hang onto a much-needed likely vote for the next nine weeks.

Who's the star here?U.S. Sen. John Cornyn plans a Dallas fundraiser after the Easter break that features guest of honor George P. Bush (nephew of George W., son of Jeb). And the invite includes a tidbit about federal campaign finance law, where contribution limits now move from year to year. "Cornyn Circle" members are being asked to give $8,000 per couple to the senator's campaign; the limits now are $2,100 per election per person. That translates to $4,200 per person for each election cycle: $2,100 for the primary election, and $2,100 for the general election. Carl Reynolds, the general counsel for the Texas Department of Corrections, is leaving that gig for the smoother waters at the Office of Court Administration, where he'll work for Wallace Jefferson, chief justice of the Texas Supreme Court. Reynolds has worked for the prison system for 11 years. Marc Levin is taking a part-time gig -- in real life, he's a lawyer -- setting up the "Center for Effective Justice" at the Texas Public Policy Institute. That Austin-based think tank is moving into criminal justice issues and Levin will be executive director of that operation. Gov. Rick Perry appointed three to the Texas Tech University System's board of regents: Larry Anders of Plano, Mark Griffin of Lubbock, and Dan Serna of Arlington. Anders is the top guy at Summit Alliance Companies, an insurance concern, and a Tech graduate. Griffin is president and general counsel of Rip Griffin Truck Service Center, L.P., serves as president of Pro Petroleum, Inc., and is president of the Lubbock ISD board. He got his law degree at Tech. Serna, a former Arlington city council member, founded and now heads Serna & Company, a CPA firm. He's an alum. The U.S. Senate okayed Jeffrey "Clay" Sell of Amarillo as deputy secretary of the U.S. Department of Energy. Sell, who was chief of staff to U.S. Rep. Mac Thornberry, R-Clarendon, for four years, moved to DOE from the White House, where he was working in legislative affairs.